Dry Bulk Carrier Segment Revival Seen by Analyst

By George BackwellAugust 13, 2014

Frontispiece of report: Image courtesy of Newport Shipping

Freight rates are set to rise across all dry bulk carrier segments as the global economic recovery gains momentum, ending the sector’s most bearish run since the start of the economic crisis in 2008/2009, according to Newport Shipping’s 'Dry Bulk Market Outlook 2014 Q2'.

Seaborne trade in bulk commodities is expected to pick up after almost two years of slow to moderate economic growth to almost 9% this year, after which it will ease off slightly to an annual growth rate of about 7%.

The dry bulk markets, especially panamax, supramax and handy size, have not been at the current low levels since the financial crisis in early 2009.

Strong supply growth (10.5% up y-o-y for Panamax) combined with a decline in most of the major coal trades (typical panamax markets) have pushed spot earnings for panamax to just above $3,000 per day, well below operating cost.

Due to correlation and the substitution effect, falling spot rates for panamax and declining soybean, cement, nickel ore and bauxite trades have put pressure on and driven down spot earrings for both supramax and handy size vessels.

However, the turning economic tide, together with a significant shift in the pace of fleet expansion, as scrapping eats into new deliveries, is driving a market rebound, according to the Newport Shipping analysis.
Source: Newport Shipping’s Dry Bulk Market Outlook 2014 Q2 (downloadable at: http://www.newportshipping.com/market-research)

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